Correlation Between Camellia Metal and FDC International
Can any of the company-specific risk be diversified away by investing in both Camellia Metal and FDC International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Camellia Metal and FDC International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Camellia Metal Co and FDC International Hotels, you can compare the effects of market volatilities on Camellia Metal and FDC International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Camellia Metal with a short position of FDC International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Camellia Metal and FDC International.
Diversification Opportunities for Camellia Metal and FDC International
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Camellia and FDC is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Camellia Metal Co and FDC International Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDC International Hotels and Camellia Metal is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Camellia Metal Co are associated (or correlated) with FDC International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDC International Hotels has no effect on the direction of Camellia Metal i.e., Camellia Metal and FDC International go up and down completely randomly.
Pair Corralation between Camellia Metal and FDC International
Assuming the 90 days trading horizon Camellia Metal is expected to generate 1.05 times less return on investment than FDC International. But when comparing it to its historical volatility, Camellia Metal Co is 2.66 times less risky than FDC International. It trades about 0.13 of its potential returns per unit of risk. FDC International Hotels is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,880 in FDC International Hotels on November 8, 2024 and sell it today you would earn a total of 110.00 from holding FDC International Hotels or generate 1.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Camellia Metal Co vs. FDC International Hotels
Performance |
| Timeline |
| Camellia Metal |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| FDC International Hotels |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Camellia Metal and FDC International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Camellia Metal and FDC International
The main advantage of trading using opposite Camellia Metal and FDC International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Camellia Metal position performs unexpectedly, FDC International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in FDC International will offset losses from the drop in FDC International's long position.The idea behind Camellia Metal Co and FDC International Hotels pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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